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British tech entrepreneur and former Autonomy chief executive Mike Lynch told jurors in San Francisco federal court that he was not involved in the transactions at the heart of the criminal case and claimed he was involved in one of the biggest fraud cases to ever hit Silicon Valley.
Lynch’s testimony Thursday came during a trial in which he and former Autonomy finance vice president Stephen Chamberlain face multiple fraud and conspiracy charges.
They are accused of participating in a scheme to overstate Autonomy’s earnings prior to its $11.5 billion acquisition of Hewlett-Packard in 2011 by using complex and illegal accounting methods, including backdating sales, engaging in “reverse” transactions with customers to pay them for purchasing products. and falsely disguise hardware stores as software stores.
U.S. prosecutors in the trial, which began in March, portrayed Lynch as the driving force behind a fraudulent deal in which HP tried to transform itself into a software company, only to write off Autonomy’s value by $8.8 billion and lay off thousands of workers.
Wearing a dark suit, white shirt and blue tie, Lynch, 58, appeared relaxed during his testimony Thursday, addressing the jury directly and occasionally laughing and exchanging jokes with his attorney.
Lynch told jurors that the weeks of trial testimony were “surreal” for him. “I sat and watched a parade of witnesses I had never met. . . and a number of transactions that I had no part in and not much else,” he said.
While Autonomy “wasn’t perfect,” it was a successful business and was “putting $300 million in the bank” a year before the HP acquisition, Lynch testified.
HP fired Lynch in 2012 due to poor business performance. In 2022, a UK judge in a civil fraud case found Lynch liable for defrauding HP. He was extradited to the US last year to face federal criminal charges to which he pleaded not guilty and is under house arrest in San Francisco.
Lynch alleged that HP tried to cover up its mismanagement of Autonomy by using it as a scapegoat after the acquisition. The trial judge limited what could be discussed before the jury regarding issues that arose after the acquisition.
The 60 percent stock price premium that HP offered Autonomy shareholders in the acquisition was virtually impossible for the CEO to turn down, Lynch said. “If you tried to block that deal. . . you wouldn’t be a CEO.”
Lynch said Autonomy has served more than 20,000 customers in more than 20 countries since the start of 2009, with the allegedly fraudulent transactions that were the subject of legal proceedings representing only a “tiny” fraction of those. Lynch said he was unaware of any of those deals.
“If you take a microscope to even an immaculate kitchen, you’ll find bacteria,” he said.
Lynch also distanced himself from former Autonomy CFO Sushovan Hussain. Hussain was sentenced to five years in a US prison in 2019 for his role in the scam.
Lynch rejected any suggestion that he and Hussain were childhood friends, even though they attended the same school. When asked what he could have done differently, Lynch said he would have addressed Hussain’s growing involvement in the sales team sooner.
Lynch described to the judges his humble origins as the child of Irish immigrants in London in the 1970s, his early interest in technology, his studies and the founding of Autonomy, and his current family life. Lynch’s wife was present in the courtroom. His two daughters were said to be unable to attend because they were taking university exams. At one point, while discussing his farm in the English countryside, Lynch turned to his interest in cattle.
“Medieval pig breeds are really robust, they stay outside, they live in the woods and stuff,” Lynch explained. Shortly thereafter, the judge suggested the defense move on to the issues of the case.
Lynch’s testimony is expected to continue for several days, followed by cross-examination by the prosecution.
Lynch’s team requested contempt proceedings, saying the government deliberately sought to bring the subject of his extradition to trial. A judge denied the request Thursday morning, but admonished the government for asking “completely inappropriate” questions of one of Lynch’s legal teams who testified Wednesday.